Home Media Magazine - November 18-24, 2007 - (Page 8) NEWS REPORT: DVD SALES COULD NOT SAVE HOLLYWOOD IN 2006 By Erik Gruenwedel www.homemediamagazine.com Q4 Titles Don’t Open as Big, But Have Longer Legs, Execs Say By Thomas K. Arnold ith the exception of Transformers, studio press releases touting first-day and first-week sales numbers have been conspicuously absent so far this fourth quarter. Studio marketing executives say that after several years of increasingly frontloaded DVD “openings,” consumers aren’t necessarily rushing out on Tuesdays, the day new releases typically arrive in stores, and snatching up the hot new hit of the week. Rather, they are waiting until later in the week — and, studio executives hope, maybe even later in the holiday season — to buy their DVDs, perhaps waiting until more big titles are available and then doing all their holiday shopping at once. “Sales are accumulating over a full week or two, rather than the fanboy Tuesday frenzy,” said Steve Feldstein, SVP of marketing and corporate communications for 20th Century Fox Home Entertainment. “With uncertainty in the economy and gas prices creeping toward $4 a gallon, trips and purchases are more considered and BLOCKBUSTER SPLITS WITH ITS AD AGENCY By Erik Gruenwedel S luggish DVD sales couldn’t help major studios overcome spiraling theatrical costs as the industry took a $1.9 billion loss on new releases in 2006, compared to $2.2 billion in profit in 2004, according to a new report. A study by Global Media Intelligence, a unit of London-based research firm Screen Digest, found that DVD sales accounted for 75% of studio revenue growth and profits from 1999 through 2004. U.S. DVD sales in the first half of 2007, however, slumped 12.5% compared to last year, the report says. A projected slight increase in box office revenue this year isn’t expected to outpace escalating fees paid to top actors, directors and producers, who collectively earned $3 billion in 2006. The report found that while revenue from technologies such as video-on-demand is expected to account for 60% of future consumer spending, it won’t deliver at the lofty levels previously predicted. “As DVD sales continue to decline and the cost of making movies increases, the message is simple: Hollywood studios must rein in costs,” said Roger Smith, analyst and author of the report. W consolidated.” One additional factor for the delay in DVD purchases is that the December release schedule this year is particularly packed with big titles. And the feeling is that consumers might wait until Pirates of the Caribbean: At World’s End (Dec. 4) and Harry Potter and the Order of the Phoenix (Dec. 11) are in stores before they do their Christmas DVD shopping and also pick up titles such Spider-Man 3, which came out Oct. 30. “It’s going to be a late Christmas, all across retail, not just for DVD,” said one studio president, who asked not to be named. “But all indications are that we are going to have a great December.” The first two Tuesdays in December alone will See Q4, Page 24 lockbuster Inc. has reportedly parted ways with advertising agency Doner after nearly 10 DVD DOESN’T ADD TO WAL-MART Q3 GROWTH By Chris Tribbey W al-Mart Stores Inc. reported net sales growth of 8.8% in the third quarter of this year, during an investor earnings call Nov. 13. However DVD didn’t contribute to that growth. “Like others in the industry, we are seeing a slowdown in sales of music and DVD,” said Eduardo Castro-Wright, EVP, president and CEO of Wal-Mart Stores Division. Wal-Mart is finding sales growth for its electronics division in TVs, GPS units, digital cameras, video games and computers, he said. He also said sales of flat-panel TVs were up 110% in the third quarter over last year, and laptop computers were up more than 80%. years. Doner was responsible for Blockbuster’s campaign that helped catapult Total Access into the public eye. The campaign included a revamped 2002 Pet Shop Super Bowl TV spot featuring a CG-animated rabbit, Carl, his guinea pig buddy, Ray, and a sidekick mouse. The ad ranked fifth in consumer recall of Super Bowl ads, according to research firm Ipsos-Reid Express Omnibus, and won four CLIO Awards. Blockbuster doubled its ad spending in 2005 to $154 million but dropped it to less than $45 million in 2006, according to Advertising Age. Blockbuster spent $86 million in marketing through the first half of 2007. CEO Jim Keyes has vowed to cut marketing spending to reduce costs. A Blockbuster spokesperson was not available for comment by press time. TRANS WORLD CEO SEEKS TO TAKE CHAIN PRIVATE By Erik Gruenwedel Theatrical Marketing Torpedoes Lionsgate Results — for Now By Erik Gruenwedel BRIEFS I REDBOX ADDS KIOSKS Redbox, the DVD rental kiosk service majority owned by McDonald’s, has expanded into Walgreens in Columbus, Ohio; and Phoenix. The expansion comes following a successful test of the kiosks in the Chicago and Houston areas. The additions bring Redbox’s nationwide total kiosk number to more than 5,000. – Chris Tribbey R obert Higgins, founder, chairman, CEO and largest individual shareholder of Trans World Entertainment, has formally proposed purchasing the retailer’s outstanding stock in an effort to take the company private. The nonbinding bid, submitted Nov. 9 to Trans World’s board, would involve purchasing about 31 million outstanding shares, according to a regulatory filing. Higgins, who owns about 40% of Trans World shares, said he would pay $5 cash per share, contingent upon obtaining third-party financing and the board’s approval. The CEO said he has contacted shareholder Bryant Riley (3.7 million shares) to gauge his interest in the $75 million transaction. The board has established a special committee of non-management members to review the proposal. Albany, N.Y.-based Trans World, founded by Higgins in 1972 and dubbed “the last standing entertainment retail chain,” operates more than 950 stores, primarily under the F.Y.E. (For Your Entertainment) and Suncoast brands. The company lost $10.1 million in the second quarter (ended Aug. 4) and has struggled as packaged media music sales continue to overshadow gains in sales of new and used DVD movies. Higgins has publicly stated he would no longer personally buy back Trans World shares, but the ongoing sluggish environment for entertainment retail underscores the need for increased cost cutting. Analysts say returning to privately held status would eliminate accounting, administrative and legal costs associated with being public. “It is an obvious turnaround type of situation,” said an analyst who no longer covers Trans World and wishes to remain anonymous. “When you need to report every quarter to stock holders, it makes it difficult to implement programs that take more than a quarter to take effect.” With the imperative holiday shopping season imminent, the analyst said the transition would allow Trans World the breathing room needed to implement changes outside the watchful eye of Wall Street. “It could be X number of years down the road if they are able to turn the ship around and bring it public again,” the analyst said. W ith the highest theatrical marketing expense ($122 million) in company history for titles War, 3:10 to Yuma and Good Luck Chuck, Lionsgate’s loss for the second quarter (ended Sept. 30) widened considerably. The supplier lost $56.2 million, compared to a loss of $14.3 million during the same period last year. Revenue for the quarter increased to a record $343.5 million, compared to $218 million last year. However, DVD sales of The Condemned and Delta Farce significantly exceeded their box office tallies and helped home entertainment revenue exceed $122 million. Other DVD contributors included Bug, Pride, Bratz Kidz: Sleepover Adventure and Doctor Strange. “Our DVD over-performance for films in the quarter that underperformed in the theaters earlier in the year … made up a lot of lost ground,” said CEO Jon Feltheimer. Steve Beeks, president and COO, said home entertainment was on track to generate about $250 million in library revenue, including $90 million in free cash. He said consumer spending for packaged media in the first half of the calendar year was down about 4%, which he said was mostly a function of the product coming to market, not broader industry trends. “We remain confident that the full year for the industry will end up essentially even with last year,” he said. Beeks said cable video-on-demand and pay-per-view revenue has reached $20 million in the first six months of fiscal 2008, compared to $24 million in 2007 and $12 million in fiscal 2006. Lionsgate to date has sold more than 2.5 million electronic downloads of both theatrical and TV content, Beeks said. “Packaged media is going to be extremely healthy at least for the next four or five years,” he said. The studio expects marketing costs for 3:10 to Yuma will increase from $27.5 million to $38 million as the studio attempts to showcase the film for Oscar consideration. The Santa Monica, Calif.-based studio’s Oscar campaign in 2006 for Crash resulted in the film winning best picture. I FOX PARTNERS WITH KFC ON ‘GARFIELD’ OFFER KFC has teamed with 20th Century Fox Home Entertainment to market the Nov. 20 DVD release of Garfield Gets Real. A laptop Garfield Gets Real meal box has been custom designed for KFC and will be distributed at 5,000 locations nationwide. More promotions will include DVD signings and Garfield-themed decorations. – Billy Gil I ‘BEN 10’ HITS TIMES SQUARE Cartoon Network Enterprises has partnered with Toys “R” Us to open a boutique based on the Cartoon Network property in celebration of the “Ben 10” live-action film. The boutique, open through Nov. 30 in New York’s Times Square, will offer “Ben 10” DVDs, action figures, toys, games, video games and apparel based on the franchise. – Billy Gil Home Media Magazine November 18–24, 2007 http://www.homemediamagazine.com
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